How it Works

Facebook ads have become an essential marketing tool for small and large-scale businesses alike. Facebook ads on a laptop.Understanding how Facebook ads work allows for a company to yield the best results for their advertising investment. In order to figure out the best strategy for one's business, one must understand the goals for the campaign as well as the target market and budget.

Goals:
Recently, Facebook facilitated the process of choosing the best type of Facebook advertisement by asking what a company's goals are before redirecting to the ad options. Now, smaller companies or companies with less experience on Facebook can easily find an advertising opportunity that suits their needs.

Targeting Options:
Facebook ads work by utilizing specific targeting options to make the advertisements more effective. The more a company targets an audience with particular attributes, down to specifics such as which high school they attended or their relevant interests, the more pertinent the ad becomes to those who view it. Facebook Advertising’s edge over Google Adwords' similar campaigns stems from this intensive targeting strategy. Best results derive from ads which are focused in on the target market, but kept broad enough to ensure that the target market contains a possible reach of at least a few thousand people.

Payment Options:
Instead of charging a lump sum, Facebook ads work on a cost per click or cost per impression basis. A company makes a bid to have an ad shown, and then Facebook compares this bid with bids from competitors to decide which ad will come up in a target markets' news feed. The maximum amount a company pays is based on the cap that the company places on spending for the day. The largest difference between the cost per click and the cost per impression payment option is that the cost per click is always equal to the exact bidding price. Conversely, the cost per impression option only has to be higher than competitors’ to be shown. For example, if company A bids $0.40 per impression and their competitor bids $0.30 per impression, company A would only be charged $0.31 per impression when that ad is shown during that period. If company A is running a cost per click ad and bids $0.40 per click, every time the ad is clicked it will cost exactly $0.40.

Per Click or Per Impression:
The type of payment option that a company chooses is mainly decided by the purpose of the advertisement. A company focused on gaining interaction will want to focus on paying for the actual clicks on the advertisement. With pay per click advertisements, Facebook targets the people most likely to click on those ads. Cost per click can also results in free impressions for those who see the ad but do not click on it. However, these ads have a higher price tag. If people do not click on them, Facebook takes them out of rotation. A company more interested in getting exposure should choose to pay per impression, as the company will be paying for exactly this. Cost per impression advertising is cheaper per action. Unfortunately, there is also the risk of a low interaction rate. The ads could potentially be wasted on people who are not interested, or who do not pay attention to Facebook ads. A social media marketing expert can help you decide which type of ad is better for your business.